Hey BP members, I've run into a stall. Last year I bought my first investment property, a condo that is currently leased. For my next property, I am looking for a single family that I could do some minor/medium rehab and turn it into a BRRRR. However, due to how my income is reported to the IRS, (I'm self employed at my day job) and what I showed for 2016, (2017 return isn't done yet obviously), my lender has told me that I'm unable to take out any more personal loans right now. I have the down payment in cash, but that doesn't mean anything without securing financing.
I know I can do hard money, but that is pricey and since it would be my first one I'm sure I'll pay a lot of points and really high interest, and depending on how much they'd lend, not sure that I could make the numbers work, or if I even want to try that right now. Even worse, if I couldn't refi later this year, I would be stuck with a very expensive loan that would likely not be worth the trouble.
Any other suggestions?
@Deke Belden - finish your 2017 returns, then go talk with the lender again.
Ttry to see in your network if you know someone, family or friend who trust you and could act a guarantor for the loan you need to take. They need to have the net worth or the income level necessary and credit score to act as guarantor.
You could pay them for the service they are giving you.
That would be one option but I am sure they are other ones
There are non-conventional asset-based lenders who will provide long-term loans (5-30 years) on investment properties, and they care a lot more if the property cash flows than your personal financials. Rates will be higher than conventional banks, but it's an option if you can't get bank financing.
Enough cant be said about going into your local community bank and talking to them about portfolio loans. Big banks that are government insured have their checklist. The are required to follow it. Your community banks that keep your loan on their books can be your best friend.
Thanks guys, all great thoughts and I plan on pursuing all of that. I just needed a little perspective. Really appreciate everyone taking the time to respond.
Given you have 1 property completed successfully under your belt, hard money may not be as expensive as you think. If your credit is good and liquidity strong a rehab loan with little money down may be an option for you.
Bob, I definitely think that could be an option, but if I wanted to buy, rehab, then rent and hold, I would need an avenue to refi out of a hard loan. But it's great advice and I'm going to be hitting the pavement seeing what a variety of lenders can and can't do. worse thing is I hear no, which is just another way of saying "try smarter"
The hard money is a stepping stone to longer term financing.
There is longer term financing available that is tailor made for your situation:
- requires no income verification
- no seasoning on title
Rates are higher than Fannie/Freddie, but if you can't get a loan and miss out on a profitable deal because you didn't want to pay a little higher interest, you'll be kicking yourself.
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